From the mid 1980's through 2005, California's population increased by 10 million. Unfortunately, it added a whopping 7 million to its Medicaid roles, but only added a measly 115,000 folks who pay income taxes. Regrettably, they treat stock options and capital gains as ordinary income, so the top 1% contributes (in good times) one half of the State's total income tax revenue. Because the State Retirement System (Calpers) is underfunded by $250 billion, Jerry Brown wants to raise the maximum marginal income tax rate to 12.3%, making it the highest rate of any state. What a great idea!!
President Obama favors eliminating subsidies from the oil industry. After all, they make billions! Why should they receive any subsidies? Well it turns out, they don't receive any subsidies. They do receive tax deductions (expenses etc.) like all other businesses. In fact, they pay a higher percentage of their earnings (41%) to the U.S Treasury than any other industry. They have paid more to the government than they paid their owners (stockholders). Apple Computer pays an effective rate of 25%, and Obama thinks that is too much.
The oil and gas industry has invested trillions in order to make billions. Their return on their trillions invested is 6.7%. Industries in pharmaceuticals, technology, beverage,etc., triple the oil and gas industry's return on investment. Interesting facts!
Ray Zimmerman
Wednesday, March 14, 2012
Sunday, March 11, 2012
KICK THE CAN
When I was a kid, I played this game in the alleys and on the streets of the Southside of Chicago. The Greeks have taken up this game in search of a solution to ameliorate their fiscal woes. They have forced most of their lenders (bond holders) to swap their bonds for new securities worth half the value of the originals. It was imperative that they were able to pull off this confiscatory debt swap so that the ECB (European Central Bank), the EU (European Union), and the IMF (we taxpayers are major participants), would loan them even more money.
To quote Thomas Donlan in Saturday's Barron's: "Greece is defaulting so that it won't have to default. It is reducing debt by borrowing. The Greeks are avoiding solvency by acknowledging that their country is insolvent, and daring the world to call them on it. They can only cover their debts by convincing their lenders not to demand payment". Obviously, this deal fixes nothing!
After Greece, who is next? When it is our turn, will there be cans to kick or will we just swap our greenbacks for say bluebacks? And if we are lucky, we might save half the value. What are we doing? Who are we kidding?
Ray Zimmerman
To quote Thomas Donlan in Saturday's Barron's: "Greece is defaulting so that it won't have to default. It is reducing debt by borrowing. The Greeks are avoiding solvency by acknowledging that their country is insolvent, and daring the world to call them on it. They can only cover their debts by convincing their lenders not to demand payment". Obviously, this deal fixes nothing!
After Greece, who is next? When it is our turn, will there be cans to kick or will we just swap our greenbacks for say bluebacks? And if we are lucky, we might save half the value. What are we doing? Who are we kidding?
Ray Zimmerman
Saturday, March 3, 2012
$4 Gas!! Who Do We Blame?
President Obama and his progressive minions claim that the high price of gasoline is not their fault, and is not in their control. They claim there is no silver bullet solution. The greedy oil companies and and oil speculators are to blame. They have this crazy idea that oil speculation should be severely restricted or even made illegal. Would they stop people from stockpiling food, medicine, and energy because they fear an impending natural disaster? Those acts would drive up prices. Many countries in the world are preparing for their own storm, a conflict that might cut off their energy supplies, so they are buying in speculation that this conflict may occur and therefore cause prices to rise. Thanks to free markets, we currently are able to buy and sell acting in our own self interest.
The President and his team claim and take credit that America is producing more domestic oil than ever before even though he has cut lease approvals both in the Gulf and the Interior by more than 50%. His predecessor is responsible for this output, but there is no praise only blame. Does he have no shame?
President Obama and even Bill O'Reilly claim that the greedy oil companies are exporting our oil rather than sell it here. This is true. We export about 20,000 barrels per day, all of it to Canada. We could keep it and refine it but that would add to the cost because the US refinery is 1500 miles farther than the Canadian refinery. The President's and O'Reilly's problem is not that they do not understand the law of supply and demand, its that these facts are so inconvenient for their argument. O'Reilly ends his nightly show assigning his audience a vocabulary word. I think he should look up the word fungible. Oil is fungible. Understanding it's meaning destroys his argument. He does, however, part company with Obama on his refusal to approve more leases, drilling in The Arctic National Wildlife Refuge, and the "no-brainier" Keystone XL.
Oil is traded throughout the world in US dollars, therefore if our dollar becomes stronger (higher demand for it), the price of gasoline will fall. One of the reasons gasoline is $4 going to 5 is that under President Obama, our dollar has weakened in purchasing power by over 20% against most major currencies. Even though Japan imports all their oil, their Yen has appreciated by over 15% against the dollar. Even the Euro with it's PIGS (Portugal, Italy, Greece, and Spain) has outperformed the dollar in the last 3 years. The Canadian and Australian currencies have outperformed by over 25%. Why? Because this administration has added $5 trillion to our debt and The Federal Reserve has printed $4 trillion. These policies have depreciated our dollar causing our price of gasoline to increase by over 20%. The price of gas has more than doubled under our President and the falling dollar represents 1/5 of that increase.
This President is stuck in his ideological green mud. He refuses to realize that America's energy resources are not limited anymore. To quote Kimberly Strassel, "New technologies in 3D mapping, fracking, and horizontal drilling has turned this country into a resource monster."
Harold Hamm, the richest oilman in North Dakota told our President that the Bakken and other oil fields both on private and federal lands could produce so much wealth in new royalties, profits, and employment, that our debt could be made insignificant. Obama's response was that he was not interested in increasing our supply of fossil fuels, that we would have revolutionary battery technology in the next five years.
GREEN MUD!
There has been minor salutary effects from the $9 trillion increase in debt owed and money printing. Most of this money has found its way to the stock market, not the economy. Higher prices on energy and food could backfire on both, the unintended consequences of this phony stimulus.
What if our President digs himself out of this green mud, (don't hold your breath) or better yet, we elect someone else who puts this resource monster to work. We could emulate Brazil. Their currency has appreciated 25% during Obama's term. How did they accomplish this? Our President helped by loaning Brazil billions to drill off their shores. (Where did you think all those gulf rigs went?) Not only does he want to be their banker, he also wants to be their best customer. We pay for their oil in our dollars which strengthens their currency and weakens ours. But if we drill and sell, our currency would have the same trajectory as Brazil's. The result would be more jobs, more investment, and more revenue to the treasury. And just maybe down the road, not only a budget, but a balanced budget and hope for the future of our grand kids.
Ray Zimmerman
The President and his team claim and take credit that America is producing more domestic oil than ever before even though he has cut lease approvals both in the Gulf and the Interior by more than 50%. His predecessor is responsible for this output, but there is no praise only blame. Does he have no shame?
President Obama and even Bill O'Reilly claim that the greedy oil companies are exporting our oil rather than sell it here. This is true. We export about 20,000 barrels per day, all of it to Canada. We could keep it and refine it but that would add to the cost because the US refinery is 1500 miles farther than the Canadian refinery. The President's and O'Reilly's problem is not that they do not understand the law of supply and demand, its that these facts are so inconvenient for their argument. O'Reilly ends his nightly show assigning his audience a vocabulary word. I think he should look up the word fungible. Oil is fungible. Understanding it's meaning destroys his argument. He does, however, part company with Obama on his refusal to approve more leases, drilling in The Arctic National Wildlife Refuge, and the "no-brainier" Keystone XL.
Oil is traded throughout the world in US dollars, therefore if our dollar becomes stronger (higher demand for it), the price of gasoline will fall. One of the reasons gasoline is $4 going to 5 is that under President Obama, our dollar has weakened in purchasing power by over 20% against most major currencies. Even though Japan imports all their oil, their Yen has appreciated by over 15% against the dollar. Even the Euro with it's PIGS (Portugal, Italy, Greece, and Spain) has outperformed the dollar in the last 3 years. The Canadian and Australian currencies have outperformed by over 25%. Why? Because this administration has added $5 trillion to our debt and The Federal Reserve has printed $4 trillion. These policies have depreciated our dollar causing our price of gasoline to increase by over 20%. The price of gas has more than doubled under our President and the falling dollar represents 1/5 of that increase.
This President is stuck in his ideological green mud. He refuses to realize that America's energy resources are not limited anymore. To quote Kimberly Strassel, "New technologies in 3D mapping, fracking, and horizontal drilling has turned this country into a resource monster."
Harold Hamm, the richest oilman in North Dakota told our President that the Bakken and other oil fields both on private and federal lands could produce so much wealth in new royalties, profits, and employment, that our debt could be made insignificant. Obama's response was that he was not interested in increasing our supply of fossil fuels, that we would have revolutionary battery technology in the next five years.
GREEN MUD!
There has been minor salutary effects from the $9 trillion increase in debt owed and money printing. Most of this money has found its way to the stock market, not the economy. Higher prices on energy and food could backfire on both, the unintended consequences of this phony stimulus.
What if our President digs himself out of this green mud, (don't hold your breath) or better yet, we elect someone else who puts this resource monster to work. We could emulate Brazil. Their currency has appreciated 25% during Obama's term. How did they accomplish this? Our President helped by loaning Brazil billions to drill off their shores. (Where did you think all those gulf rigs went?) Not only does he want to be their banker, he also wants to be their best customer. We pay for their oil in our dollars which strengthens their currency and weakens ours. But if we drill and sell, our currency would have the same trajectory as Brazil's. The result would be more jobs, more investment, and more revenue to the treasury. And just maybe down the road, not only a budget, but a balanced budget and hope for the future of our grand kids.
Ray Zimmerman
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